The U.S. Isn’t the Only Customer in Town

The political and economic volatility in the United States has led many Canadians to wonder if it’s time to diversify our trading partners. It’s a fair question—and one we should have been asking long before the tariffs were even a possibility. Yes, the United States is our closest ally and our largest trading partner, but it’s time we grew out of our dependence. Not out of bitterness or ideology, but out of long-term strategic sense. 

We don’t need to ditch the Americans—nor can we. The U.S. is the world’s largest market, and it’s right next door. We share a common language, similar regulatory environments and decades of integrated supply chains. But overreliance on the States is dangerous. Roughly 75 per cent of Canada’s goods exports go south of the border, while the U.S. sends only about 15 per cent of its exports to us. We need the Americans a whole lot more than they need us, and they know it.

Diversification would give us more leverage and stability in the long term. But there’s lots to do before we get there. Over the first decade of the 2000s, when I served in the Harper government, the prime minister recognized our overreliance on the U.S. and sought new footholds. His team began to pursue trade deals beyond North America, signing early agreements with South Korea, the European Union and countries across the Indo-Pacific. But in the decade since, that momentum has slowed.

Now we should be searching aggressively for proper trading partners. Prime Minister Carney wants to reinvigorate our trade ties with Europe. I encourage it, but Europe is not considered a high-growth economic region, so we shouldn’t just settle there. We should also rekindle our relationship with India. Despite its explosive economic growth and demographic heft, our trade talks with them remain stuck in the slow lane. We need to lean into markets that want what Canada has—especially Japan and South Korea. Japan is a destination for Canadian energy exports, beef, minerals and agricultural products, and its resource-dependent economy would readily import more Canadian LNG. In exchange, they could trade us semi-conductors, robotics and industrial machinery. Korea is another energy-dependent country that could benefit from our oil, while providing us with advanced electronics and circuits.  

These countries are hungry for the very things Canada excels at. And let’s be realistic about what those things are. We’re not going to become a global car-exporting powerhouse anytime soon. Our comparative advantages lie in what comes from the ground—whether it’s Saskatchewan potash, Alberta energy, Quebec aluminum or prairie wheat. 

But to meet that demand, we need to solve a big problem: we’ve built our infrastructure to send everything to the U.S. border. We need pipelines, ports and rail systems that can get Canadian goods to tidewater, not just south of the border. Take oil and gas—there’s clear demand for Canadian energy in Asia, but without adequate infrastructure to move it, that opportunity remains underutilized. To update our infrastructure, we need major regulatory reform: streamlining the approval of mines, energy projects and major industrial investments. Foreign investors aren’t clamouring to build in Canada when projects get bogged down for years in red tape and environmental reviews. Prime Minister Carney’s recently passed nation-building bill will help; we need to be faster, clearer and more strategic if we want to compete globally.

Trade diversification isn’t a government-only affair. The 100 largest private-sector firms in Canada account for more than 60 per cent of our exports. And to them, the U.S. has been a rational, profitable choice for decades. I do not blame them. Why navigate foreign languages, labels and regulatory systems when a huge, familiar market is right next door? But that caution has left us underdeveloped in global markets. Australian firms, by contrast, routinely trade across languages and legal systems. They’ve made the effort, and so can we.

Building trade relationships takes years, if not decades. It’s not something we can do on a whim because relations with the U.S. turn sour. And that’s why this work has to be evergreen—and baked into our long-term economic planning. Waiting until the next cross-border spat erupts is too late. We need to diversify even when things are going well with the Americans.

That’s not to say current concerns are unfounded. Tariffs have hit certain sectors hard—steel and aluminum, in particular—but it’s the perception of instability that rattles companies more than the policies themselves. Many believe things will eventually settle down. And they probably will. The U.S. has long been our best customer, and it always will be. But let’s not mistake familiarity for security. Just because we’ve always done it this way doesn’t mean we should keep doing it this way. Broadening our economic base makes us more resilient and more respected. It also gives us better leverage when negotiating with the Americans.

International trade is not a zero-sum game. Strengthening our ties with India or South Korea doesn’t mean weakening them with the U.S. On the contrary, diversification enhances our position everywhere. It signals that Canada is serious, confident, and open for business and invested in our own long-term economic security.

Meredith Lilly is a professor of international economic policy at Carleton University.